Corporations Act 2001 - Australia China Trade & Investment

Report
Investing in
Australia
Australia-China Trade & Investment
Beijing| September 2013
Overview
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Significant investor visa migration
Significant investor visa classes of investments
Where are the opportunities?
Indirectly investing in property
Investing in private equity
Investing in managed funds
Tax issues for Chinese investors
How Sparke Helmore can help
2
Significant investor visa
migration
•
A new visa class for investors investing $5 million into a
complying investment for four years
•
Subclass 188 (Provisional) and Subclass 888 (Permanent)
Residence
period
•
160 days residence period over four years
•
Duration of stays is at discretion of investor
Visa
requirements
•
No English language tests, no points tests, no age limits
•
Health and character tests only
•
Funds for investment must be lawfully acquired
•
Once visa is processed, applicants are invited to invest into
complying investments – the four year period starts from
then
New Visa
Class
Visa funds
3
SIV classes of investments
4
Where are the opportunities ?
Property
Private
equity
Managed
funds
•
Prime grade industrial assets
•
Retail assets
•
“Off the plan” residential apartments  $800K
•
Health and aged care services
•
Consumer and retail businesses
•
Agriculture
•
Property funds – AREITS
•
Hedge funds – alternative assets, lower leverage
•
Fund of funds – equities and international equities
5
Indirect investment
in property
Investing in property: key issues
SIV migration
criteria
Available
investment
structures
Foreign
Investment
Review Board
Financing and
security
Tax and stamp
duty
•
Direct property ownership is not permitted
•
Property may be owned only through a regulated managed
fund (i.e. a fund that has an Australian Financial Services
Licence)
•
Units in a unit trust (which is a regulated managed fund)
•
Interest in a syndicate (which is a regulated managed fund)
•
Shares in a property development company
•
Foreign investment review, notification and approval
required
•
Existing residential property not permitted (except for
redevelopment)
•
Loan to value ratios are typically 60% to 70%
•
Bank will take security which is registered on the National
Personal Properties Securities Register
•
Upfront tax planning is essential
•
Stamp duty applies differently in each state and territory
7
Typical property investment structure
Investors may invest in property via a fund or development company
Development
partner
Investor
Joint venture
agreement
Development
company
Fund
Development
agreement
Property
8
Investing in private
equity
Investing in Private Companies:
key issues
Qualifying
business
New business
Ownership
interest
Not
speculative or
passive
•
Must be operated for the purpose of making a profit
•
Must provide goods or services to the public (other than
the provision of rental property)
•
New business is permitted – must be a genuine attempt to
establish and maintain a qualifying business
•
Need to demonstrate a business plan, budget, market
research and the undertaking of business activities
•
Ownership interest requires an equity interest (i.e. shares)
•
May be owned via a wholly owned company or trust
•
Must not be operated primarily or substantially for the
purpose of passive or speculative investment
•
The purchase of an asset for the sole purpose of making
a capital gain is considered speculative
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Case study: private equity investment
structure
George Institute
Investor(s)*
shareholders
agreement
39.5%
shares
•
•
60.5%
Affordable
Medicines
Limited (AML)
•
•
The George Institute
(GI) is an Australian
leading global health
research institute
GI is currently
commercialising a
cardiovascular polypill
for the Asian market
Investors acquire
shares in AML and
enter into a
shareholders’
agreement with GI
Exit strategy may be
a partial sell down
and financing, 100%
trade sale or IPO in
five to seven years
11
Case study: private equity investment
structure cont.
Investor(s)*
•
Exchangeable, redeemable
preference securities
JETGO
AUSTRALIA
HOLDINGS
Exchanges
into shares
in JETGO
Airlines on
IPO
•
100% subsidiary
•
JETGO
AUSTRALIA
AIRLINES
•
JETGO Australia
Holdings operates a
private “fly-in fly-out”
charter service for mining
companies and
corporates.
JETGO plans to establish
a subsidiary Australian
regional public airline
company.
Investors acquire an
exchangeable security in
JETGO Australia
Holdings.
Upon an IPO of JETGO
Australia Airlines, this
security is exchanged for
shares in JETGO
Australia Airlines.
12
Investing in
regulated managed
funds
What is a regulated managed fund ?
Investor
Units
Trustee
Trust deed
$$$$
•
Trustee is a fiduciary
•
Trustee must have an
Australian Financial
Services Licence
•
Trustee is governed by
Australian Securities &
Investments Commission
•
Trust deed governs the
relationship between
trustee and investors
Unit trust
Assets may be:
Assets
•
infrastructure
•
property
•
government bonds
•
listed equities
•
cash instruments
•
mortgages, and
•
other managed funds.
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Investing in regulated managed
funds: key issues
ASIC regulated
The trustee of the fund must have an Australian Financial
Services Licence (AFSL), which authorises them to operate the
fund. Information about the trustee’s AFSL can be found on the
Australian Securities & Investment Commission’s website at
www.asic.gov.au.
Governing
arrangements
The terms of the investment are governed by the trust deed and
the representations made by the trustee in any disclosure
document, for example, the information memorandum or product
disclosure statement.
Structure of
investment
An investment in a managed fund is generally an investment in
units in a unit trust. The investor has a beneficial interest in the
income and capital of the trust, but generally has no interest in the
underlying assets of the fund, unless the trust deed provides the
investor with any such specific rights vis-a-vis the trustee.
Investment is
at risk (unless
capital
protected)
The fund manager will generally represent that the fund will target
a particular return for the investment. However, there is no
guarantee that the return will be achieved or that capital will be
returned, unless capital protection is offered.
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Case study: managed fund investment
Investor(s)*
Perpetual Trustees
Limited (Trustee)
Equities fund
•
Perpetual operates a
fund of funds model
•
Perpetual must manage
the funds in accordance
with its AFSL conditions
the Corporations Act
2001 and the trust deed.
•
Investors acquire units in
a unit trust
•
Investors can redeem
their units at any time
(may be subject to
withdrawal fee)
Managed fund
International
equities fund
Bond fund
*Wholesale investors only
(s761 (7) Corporations Act 2001 (Cth))
16
Tax issues for Chinese investors
Australian tax
issues are
complex
•
Tax advice is essential
•
Significant tax leakage could arise where double taxation
occurs
•
Investors may be an Australian resident, temporary resident
or non-resident for tax purposes, depending on their profile
•
Tax residency is a question of fact and degree
•
There may be advantages to structuring the holding of
complying investments through companies or trusts
•
Tax residency of the company or trust must be ascertained
if management and control is outside Australia
•
Foreign investors acquiring Australian assets do not
receive the 50% CGT discount
•
Foreign investors should obtain advice about withholding
tax
•
Foreign investors should obtain advice about the stamp
duty implications of their Australian investments
•
Stamp duty applies differently in each state and territory
Tax residency
Companies
and trusts may
be taxed
differently
CGT/
withholding
tax
Stamp duty
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How Sparke Helmore helps
SIV migration
Tax advice
One stop shop
Visa eligibility
and application
Tax residency
and tax on
investments
• Visa processing
• Tax advice
• Investment
structuring
• Investment
management
Ongoing advice investment
management
Investment
management
Investment
vehicle and
structure
Investment
structuring
18
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19
Sparke Helmore Lawyers
20
Important information
This document has been prepared by Sparke
Helmore for information purposes only. This
document provides general factual information
only, is not financial advice nor does it provide any
recommendation to invest. No representation or
warranty is given or implied as to the accuracy,
completeness or reliability of any statements or
opinions in this document (any of which may
change without notice).
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